Koninklijke Ahold Del Ord

Ladies and gentlemen, good morning and welcome to the analyst conference call on the second quarter and half year 2022 results of Aarhus Dalherza. Please note that this call is being webcast and recorded. Please note that in today's call, forward-looking statements may be made. All statements other than statements of historical facts may be forward-looking statements. Such statements may involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those included in the statements. Such risks and uncertainties are discussed in the Interim Report, Second Quarter and Half Year 2022 and also in Ajo del Herza's public filings and other disclosures. Ajo del Herza disclosures are available on ahodelherza.com. Forward looking statements reflect the current views of AHOL DEL HERZE's management and assumptions based on information currently available to AHOL DEL HERZE's management. Forward looking statements speak only as of the date they are made and AHOL DEL HERZE does not assume any obligation to update such statements except as required by law. The introduction will be followed by a Q&A session. Any views expressed by those asking questions are not necessarily the views of AHOL. At this time, I would like to hand the call over to JP O'Meara, Senior Vice President, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. I'm delighted to welcome you to our Q2 2022 results conference call. On today's call are Franz Muller, our CEO, and Natalie Nice, our CFO. After a brief presentation, we will open the call for questions. In case you haven't seen it, the earnings release and the accompanying presentation slides can be accessed through the investor section of our website, aholtales.com, which also provides extra disclosures and details for your convenience. To ensure everyone has the opportunity to get their questions answered today, I ask that you initially limit yourself to two questions. If you have further questions, then please re-enter the queue. To ensure ease of speaking, All growth rates mentioned in today's prepared remarks will be at constant exchange rates unless otherwise stated. I now turn the call over to Frans.

Thank you very much, JP. And first of all, let me wish you a happy birthday on this special day. And good morning, everyone. I'm very pleased to report another strong and resilient quarter for Ajo de Lesse. Every strategy at Hourglass starts and finishes with the customer. And let me assure all stakeholders listening to this call today that particularly now, when times are getting tougher, we are leaving no stone unturned to support customers in our own unique way. Powered by rich data and insights, our unparalleled understanding of customers, our broad assortment, and the stickiness of food at home consumption are allowing us to play to our strength. This in turn is driving continued market share gains and strong business performance. For customers and businesses alike, these are without doubt uncertain times. The war in Ukraine is causing an unprecedented energy crunch, especially in Europe. Commodity prices are high. Inflation has reached record levels. Interest rates are rising and the undeniable effects of climate change are constant in our daily lives. Rapid cost of living increases are putting customer households and budgets under pressure. So in response, as you can see on slide six, we are doing what we do best, visibly and proactively supporting customers in our own stores and our omni-channel touchpoints, helping them to navigate and manage their spending efficiently. Three things in particular are making a big difference. First of all, We have been fast and agile in introducing more entry-price product solutions in stores and online, as always weighted towards affordable fresh and healthy food options. Second, we are expanding our high-quality, healthy and better value own brand assortments. And third, we are ensuring our increasingly personalized loyalty programs continue to offer competitive and attractive solutions. For example, in Q2 in the US, CRM campaigns, excluding Fresh Direct, run by the brands reach over 27 million households and delivers 5.3 billion personalized offers. In a large part, we are able to fund these and other activities through our ongoing Save for Our Customers programs. And for those of you who are unfamiliar with these annual programs, they help our great local brands absorb cost increases to invest in better customer propositions and to keep shelf prices as low as possible. Our efforts in this respect are clearly paying off. Customers vote with their feet, their clicks and their wallets. They expect consistency from us in offering great value, convenience and innovation. And it is through this consistency and the relentless execution of our leading together strategy that we are able to deliver the type of financial performance we are proudly reporting today. With 4.7% growth in comparable sales, excluding gas and diluted underlying earnings per share up 11%, our Q2 results exceeded our original expectations and contributed to the raise in full-year earnings and free cash flow guidance for 2022 that Natalie will talk about later. Before that, let me share a few strategic highlights and proof points that underpin how all of our brands deliver sequential improvements in comparable sales compared to the first quarter. Starting with our customer priority as seen on slide 10. The focus of this priority is to unlock the creativity and innovation of our teams to cement deeper and more digital customer relationship. Some great examples include, for example, Albert Heijn launched the innovative Best from the Netherlands, Lekkerster uit Nederland campaign and introduced the Beta Eten festivals for customers to experience first-hand the Albert Heijn mission, make better food accessible for everyone. Deleuze in Belgium implemented Little Lions with price reductions of 5 to 30% on the selection of 500 own brand products. And after the program's first month, Deleuze has already seen a 15% increase of Little Lions product sales. Food Lion introduced a rotating daily meal deal that feeds a family of four for $12 only and a weekly daily deal of meat and cheese. And lastly, Hannaford redesigned their time savers program to increase visibility on the assortment of affordable ready meals aligning directly with a fresh and convenient strategy. Moving on to our operational priority. which is the enabler of our omnichannel transformation geared to drive long-term operational efficiency. We know that customers really value our omnichannel ecosystems, which offer them the flexibility and convenience of shopping whenever and wherever they want. And looking at slide 10, we again accomplished a lot in the quarter. In Europe, Albert Heijn expanded their delivery area, making online shopping now accessible to 90% of Dutch households. And in Belgium, Deleuze launched DeliveryPlus, a subscription service for its online home delivery that offers unlimited free delivery. Additionally, we are proud of the successful transition of the York, Pennsylvania distribution center into the self-managed network. This brings our total number of network facilities in the US to 22. ADUSA Supply Chain also implemented a new solution for all direct-to-store delivery vendors. DSD vendors, which provides better visibility into cost, margin, and profits on items received at stores. The last two initiatives I mentioned in particular show how optimizing our supply chain is also scaling up to provide future operating margin support by reducing product cost and increasing product availability. Moving on to our next priority, healthy and sustainable. For a long time, sustainability has had a central position in our organization. Not only is it one of our key focus areas, but more importantly, it's a critical driver of our purpose. Eat well, save time, live better. And in Q2, we again have many highlights to share with you, which you can see on slide 12. Of particular note is the publication of our second human rights report in June. In addition, Outerless also maintained its MSCI ESG AA rating, with improvements noted in several criteria. In the US, Giant Food has partnered with Loop, a circular reuse platform, to bring reusable packaging solutions to customers. And in light of the ongoing climate and energy crisis, Albert Heijn is accelerating the switch to renewable energy sources. Here the brand will increase the number of electric trucks and delivery cars it uses, starting with a 100% electric delivery fleet in 2022, for the The Hague city centre with Rotterdam, Utrecht and Amsterdam to follow in 2023. The brand aims to switch completely to biofuels for all its transportation by 2024 and to no longer rely on gas for climate control in stores in the Netherlands and Belgium by 2023. That's already next year. Moving on to our final focus area, our portfolio priority. This is a good opportunity to spend a few minutes to provide an important update on the intention to subipoball.com. As you will remember, we first announced our intention to subipoball.com at our November Investor Day 2021. in order to build on the remarkable success, customer loyalty and leadership position of BOL.com as a retail tech platform. We continue to believe strongly in the value and potential of BOL.com, underpinned by its ongoing robust market share gains, as well as its high customer and partner satisfaction scores. However, in light of current equity market conditions, we have decided that the second half of 2022 is no longer the right time to pursue a sub-IPO of Bold.com. We remain committed to securing the right future path to unlock value for Bold.com and I, all the less. We will continue to actively monitor market conditions and revisit opportunities where market conditions are more conducive. Like other digital companies in Europe, Bol.com is adjusting to a more dynamic economic climate. Therefore, we have completed a detailed review and revised Bol.com's medium-term growth and investment plan to provide additional flexibility and agility going forward. Our revised plans will ensure we remain in a strong position to continue to outgrow the market. This in turn is expected to yield healthy double-digit sales and EBITDA compound annual growth rates in the medium term, as well as deliver above group average return on capital as the business will scale. As a result of these revisions, we are also updating our group capital expenditure and free cash flow guidance accordingly. Group capex will now average around 3% of group sales from 2022 to 2025, versus our original guidance of 3.5%. We will continue to focus these investments on our growth-oriented omnichannel transformation, including elevating our store networks, increasing automation and mechanization, unlocking monetization potential, and increasing last mile delivery infrastructure. Throughout all these areas of investment, we are also committed to furthering our efforts to reduce our climate impact. Given the ongoing strength of our underlying operations, together with this new CAPEX plan, we are also increasing our cumulative free cash flow expectations for the period of 2022-2025 to around 7.5 billion euro, compared to our original expectation of over 6 billion euro. One of the core strengths of our company is to generate cash. This gives us great protection to weather any storms the environment may throw at us, while at the same time providing plenty of leeway to continue investing in our customers, our associates, and future-proofing our organizational infrastructure, as well as ensuring a fair remuneration of all other stakeholders. Despite the expectation that challenging times remain ahead, I'm confident that our brands are on the right path to support all our stakeholders and deliver on our ambitious goals. We have positive momentum going forward into the second half of the year. And on that note, let me now hand over to Natalie, who will add her comments on the quarter and provide further specifics on the outlook for 2022.